Cohen & Steers Inc

Ladies and gentlemen, thank you for standing by. Welcome to the Cohen and Steers first quarter 2022 earnings conference call. During the presentation, all participants will be in the listen-only mode. Afterwards, we will conduct a question and answer session. At that time, if you have a question, please press the 1 followed by the 4 on your telephone. If at any time during the conference you need to reach an operator, please press star 0. As a reminder, this conference is being recorded on Thursday, April 21st, 2022. I would now like to turn the conference over to Mr. Brian Heller, Senior Vice President and Corporate Counsel of Cohen and Steers. Please go ahead.

Thank you, and welcome to the Cohen and Steers First Quarter 2022 Earnings Conference Call. Joining me are our Chief Executive Officer, Joe Harvey, our Chief Financial Officer, Matt Stadler, and our Chief Investment Officer, John Che. I want to remind you that some of our comments and answers to your questions may include forward-looking statements. We believe these statements are reasonable based on information currently available to us, but actual outcomes could differ materially due to a number of factors, including those described in our accompanying first quarter earnings release and presentation, our most recent annual report on Form 10-K, and our other SEC filings. We assume no duty to update any forward-looking statement. Further, none of our statements constitute an offer to sell or the solicitation of an offer to buy the securities of any fund. Our presentation also contains non-GAAP financial measures, referred to as adjusted financial measures, that we believe are meaningful in evaluating our performance. These non-GAAP financial measures should be read in conjunction with our GAAP results. The reconciliation of these non-GAAP financial measures is included in the earnings release and presentation to the extent reasonably available. The earnings release and presentation, as well as links to our SEC filings, are available in the investor relations section of our website at www.cohenandsteers.com. With that, I'll turn the call over to Matt. Thank you, Brian. Good morning, everyone.

As usual, my remarks this morning will focus on our as-adjusted results, which in addition to the customary items, exclude costs of $15.2 million associated with the initial public offering of Cohen and Steers Real Estate Opportunities and Income Fund. A reconciliation of GAAP to as-adjusted results can be found on pages 13 and 14 of the earnings release and on slides 16 through 19 of the earnings presentation. Yesterday, we reported earnings of $1.04 per share, compared with 79 cents in the prior year's quarter and $1.24 sequentially. The fourth quarter of 2021 included cumulative adjustments to compensation and benefits and income taxes that lowered our compensation to revenue ratio and effective tax rate, respectively. Revenue was $154.3 million for the quarter, compared with $125.8 million in the prior year's quarter and $159.7 million sequentially. The decrease in revenue from the fourth quarter was primarily due to two fewer days and performance fees earned in the fourth quarter on certain institutional accounts. No performance fees were recorded in the first quarter. Our effective fee rate was 57.6 basis points in the first quarter compared with 58.1 basis points in the fourth quarter. Excluding performance fees, our fourth quarter effective fee rate would have been 57 basis points. Operating income was 68.9 million in the quarter, compared with 53.2 million in the prior year's quarter, and 82.6 million sequentially. Our operating margin decreased to 44.7% from 51.7% last quarter. The fourth quarter included an adjustment to reduce the full year 2021 incentive compensation accrual to reflect actual amounts paid. Expenses increased 10.7% when compared with the fourth quarter, as higher compensation and benefits were partially offset by lower G&A and distribution and service fees. Compensation to revenue ratio for the first quarter was 33.75%. consistent with the guidance provided on our last call. The decrease in G&A was primarily due to lower recruitment fees, a decrease in travel and entertainment, and a reduction in hosted conferences. And the decrease in distribution and service fee expense, which as mentioned earlier excludes the costs of our new closed-end fund, was primarily due to two fewer days in the quarter and lower commission expenses resulting from a decrease in low share class activity. Our effective tax rate was 25.5 percent for the quarter, lower than the guidance provided on our last call. The reduction in the effective tax rate was primarily due to lower state and local income taxes. Page 15 of the earnings presentation sets forth our cash and cash equivalents, corporate investments in U.S. Treasury securities, and liquid seed investments for the current and trailing four quarters. Our firm liquidity totaled $180.7 million at quarter end compared with $248.2 million last quarter. Firm liquidity as of March 31st reflected the payment of bonuses as well as the firm's customary repurchase of common stock to satisfy employee withholding tax obligations arising from the vesting and delivery of restricted stock units on behalf of participating employees. In addition, during the first quarter, we paid $15.2 million of costs associated with the IPO of our new closed-end fund, and we continue to be debt-free. Assets under management totaled $102.1 billion at March 31st, a decrease of $4.5 billion, or 4%, from December 31st. The decrease was due to market depreciation of 4.6 billion and distributions of 697 million, partially offset by inflows of 756 million. This marks the 11th consecutive quarter we have recorded net inflows. Advisory accounts had net outflows of 42 million during the quarter, compared with net outflows of 456 million during the fourth quarter. We recorded 1.6 billion of inflows, 492 million of which were from new mandates and 1.1 billion of which were from existing accounts. Offsetting these inflows were 1.6 billion of outflows. One U.S. client who still maintains assets with us terminated an opportunistic U.S. real estate portfolio that was funded at the outset of the pandemic drawdown in April 2020. and a few others rebalanced their accounts. Joe Harvey will provide an update on our flows and institutional pipeline of awarded unfunded mandates. Japan's subadvisory had net inflows of $116 million during the quarter, compared with net outflows of $242 million during the fourth quarter. The last time we recorded net inflows from Japan's subadvisory was the fourth quarter of 2020. Distributions from these portfolios totaled $271 million compared with $276 million last quarter. Sub-advisory excluding Japan had net outflows of $80 million primarily due to a few clients rebalancing their portfolios. Open-end funds had net inflows of $208 million during the quarter with outflows from preferred securities portfolios being more than offset by inflows into U.S. real estate, global real estate, and multi-strategy real assets portfolios. And closed-end funds recorded $554 million of inflows, primarily due to the IPO of Kohn & Steers Real Estate Opportunities and Income Fund. Now I'd like to briefly discuss a few items to consider for the second quarter and the remainder of the year. With respect to compensation and benefits, we expect that our compensation-to-revenue ratio will remain at 33.75%. We still expect GNA to increase 10 to 15% from the 47.2 million we recorded in 2021, as we continue to make incremental investments in technology, including the implementation of new systems, cloud migration, and upgrades to our infrastructure and cybersecurity framework. We also expect that both travel and entertainment and sponsored conference costs will increase as global conditions continue to return to pre-pandemic levels. And finally, we expect that our effective tax rate will remain at 25.5 percent. Now I'd like to turn it over to our Chief Investment Officer, John Shea, who will discuss our investment performance.